Investing in the Philippines

Hello everyone,

During your expatriation in the Philippines, you might have been made aware of interesting investment schemes (local or international). Whether one wants to make money grow, protect oneself or prepare for retirement, investment is always an attractive option. It is, however, never free of risk. Would you, therefore, like to share some practical information for other expats and expats to be?

Is the Filipino economy open to foreign investment? Do local authorities encourage investment (through formalities, tax etc.)?

What are the promising sectors to invest and do business in the Philippines?

Who do you turn to for information before investing your money? (organisation, professional, lawyer, consultant)

According to the sectors of activity and the projects, what budget should be foreseen for an investment in the Philippines?

What do you think are the pitfalls to avoid and what advice would you give someone who wants to invest?

Thanks in advance for your feedback,
Diksha

Most expats would rather not expose themselves to the unknowns in investments and the changes in exchange rates.  In 1994 if I would have invested in certificates of deposit in pesos I could have gotten an interest rate of 7.2 % Per year for 10 years, so my $10,000, in pesos 250,000, would have grown to 500,000 pesos in 2004.  In 2004 the exchange rate was 50 pesos to the dollar, so it would be worth $10,000.  But every year I would have had to pay income tax in the USA on the earnings, so I would have lost money.  That same $10,000 invested [at] 2% in the USA would have been worth $12,000 in 2004 and I would have paid less tax than the above investment in the Philippines.

Majority of my income is in dollars so I would´t exchange it to another currency and buy shares in a foreign exchange denominated in a foreign currency. And the taxes involved on both countries...Forex fluctuations... No thanks.

I pick my stocks denominated in dollars in the same country that dollar originated. I´ve been investing lately more for safety on ETFs in the medical field (instruments and biotechnology) and technology itself. There are dividend yields that I do enjoy to spend
and some I reinvest.

robal

My banker offered me a CD the other day that pays just over 5%.

They call these long term negotiable certificates of deposit.

If they are for longer than 5 years then there is no taxation on them.

Tax on CDs in the Philippines works like this:

less than three years =  20% tax
three to less than four years = 12% tax
four to five years =  5% tax
greater than five years = no tax

They are covered by PDIC up to 500,000PHP (~$10,000)

Beyond this, I hear there are casinos in Manila.

Another reason to not invest in the Philippines is the $10,000 rule.  If a US Citizen has more than $10,000 in all foreign accounts for even one day during the year, then extra tax forms must be filed, even if your total income is below the threshold for having to file.  Failure to report such holdings could result in a $10,000 penalty.   Investing $10,000 [at] 5% would result in $500 of USA taxable income per year.

Is the Filipino economy open to foreign investment?  Do local authorities encourage investment (through formalities, tax etc.)?

What are the promising sectors to invest and do business in the Philippines?

Q: Who do you turn to for information before investing your money? (organisation, professional, lawyer, consultant):
A: Don't trust any/many companies due to poor legaslatvie compliance law's.

Q: According to the sectors of activity and the projects, what budget should be foreseen for an investment in the Philippines?
A: Depends on one's portfolio structure.

Q: What do you think are the pitfalls to avoid and what advice would you give someone who wants to invest?
A:
* Change of government.  In any country, and especially developing country a change of government can will bring risk/possibly reward.
* Environmental risk:  Typhoon, earthquake, volcano.
* Corruption
* Not been in the know:  To invest in anything you need to know "who is who in the zoo" and what is happening on the ground.

Another point is Taxation:
* A need to fully understand the taxation in the Philippine's
* A need to fully understand the taxation agreement your country, of residents/citizenship, has with the Philippines.


Remember the old saying's:
* "If it sound's to good to be true, it may not be true."
* "High returns equal's high risks".  This choice is yours to make and will depend on your current portfolio.

One thing investing in the country where you live (Philippines) is that you will get currency protection.  In may case AUD to PHP.

My layman take on this:
The Usd$ is for now still considered a "safe heaven" currency; and expected to appreciate in the near term; especially vs local asian currencies.
Worldwide "Taxman" are on the prowl for taxable assets/investments.
So keeping it under yr pillow at least for the 'near' term would be the way i go...hahaha...just my take!!

In USA I can get 1.75 % CD's in banks with federal deposit insurance on deposits up to $500,000.  Under my pillow pays nothing, interrupts my sleep.

Hahaha...well noted on 'mugtech' as to having an interupted sleep that could be due to the current highest value of denomination of the US$ currently in production is the $100 bill, but in *decades past, the Federal Reserve has issued $1,000, $5,000, $10,000 and even **$100,000 bills....
Those were the days my friend... could sleep happily with a with only 1pc of those **bills....hahaha

I invest in the markets through US brokerage firms and real estate. Some of the fund investments are in foreign markets but they are managed by experts who know the markets, currency exchange issues, etc. Besides overall performance having been extremely good the past 10 years (I don't expect that to continue indefinitely) we have laws in the US that provide transparency (disclosure of risks and fees paid). We also have recourse in the courts. None of this applies to a foreign expat direct investor in the Philippines. Way too risky in my opinion.

pnwcyclist :

We also have recourse in the courts. None of this applies to a foreign expat direct investor in the Philippines. Way too risky in my opinion.

That is the key takeaway from this thread. You can make a small fortune in the Philippines if you start out with a large fortune. The investment environment is extremely competitive and most foreigners are not prepared to jump into it.

The long-term-deposit interest rates mentioned seems to be limited to the rural banks. The commercial banks (BDO, BPI, MetroBank....) are no better than passbook.  Given ROI from land, real estate, farming, legal and ethically run businesses,  and my long term 401K US investments, 5% is not to bad for the degree of risk.  Some of the rural banks appear very solid and the central bank takeover of any that fail (little ones that have only a few branches) appears to be professional and quick.  Just do not forget the 500K liability limit, 1 Mill for joint account.

Terms are you can cash the instrument out any time, but any interest earned in excess of passbook is usually forfeit.

That said I can only say excellent things about Katipunan Bank, good about Rizal Bank, was severely disappointed with East West Bank.

LemSaDipolog :

The long-term-deposit interest rates mentioned seems to be limited to the rural banks. The commercial banks (BDO, BPI, MetroBank....) are no better than passbook.  Given ROI from land, real estate, farming, legal and ethically run businesses,  and my long term 401K US investments, 5% is not to bad for the degree of risk.  Some of the rural banks appear very solid and the central bank takeover of any that fail (little ones that have only a few branches) appears to be professional and quick.  Just do not forget the 500K liability limit, 1 Mill for joint account.

Terms are you can cash the instrument out any time, but any interest earned in excess of passbook is usually forfeit.

That said I can only say excellent things about Katipunan Bank, good about Rizal Bank, was severely disappointed with East West Bank.

The rates are not limited to rural banks.

PNB has LTNCDs that pay 5-6% with no tax if greater than 5 years. I have seen similar at other banks. You have to ask them about it at a local branch.

The rural banks that I have saved with offered nothing but 1 year cds, but the interest was over 3% and still is. Bad thing is that you have to pay tax on that interest.

Also banks including rural banks are required to publish their report quarterly. Anyone thinking of investing should check that out and learn what it all means.

It is not always true, but the longer a bank has been around the more trustworthy it is (locals' rule of thumb).

one thing to add about the LTNCDs is that you cannot just take out your money if you need it back before maturity

They have to find a buyer for it. If rates have gone up since you bought it then you will take a hit on that - you are trying to sell a lower rate cd in a higher rate environment. They also charge a fee to broker it.

mugtech :

Another reason to not invest in the Philippines is the $10,000 rule.  If a US Citizen has more than $10,000 in all foreign accounts for even one day during the year, then extra tax forms must be filed, even if your total income is below the threshold for having to file.  Failure to report such holdings could result in a $10,000 penalty.   Investing $10,000 [at] 5% would result in $500 of USA taxable income per year.

Hi Mug, Your quote interested me. I did not know i had to report to  US IRS the interest i earn on dollar time deposits in Phil. banks. I earn around 600.00 dollars the past year but figured i was below the filing threshold requirement. Also i  did not know about the $10,000  penalty? I guess i need to read up on the IRS web site. Thanks for the information.

At at least the two rural banks i mentioned you are not correct, but they are 2 of the biggest.  I have cashed in a 6% at Katipunan and received the full principal after only 1.5 years.  The same policy applies at Rizal.  They also offer 1,3,6month 1 yr deposits at lesser amounts.  The taxes are just as you said earlier. 

Thank you for the tip, i will check out the policies of PNB,  The commercial banks i previously mentioned have recently reiterated their no long term deposit and even today added to that list is PBCOM bank which is a recent conglomeration of several small rurals that went commercial and another such bank today that offered only 2% for 5 yrs on 1 million Peso deposit.

There is little consistency so ya gotta do the shoe leather thing (i know they are very seldom really leather anymore).

I am hoping someone here has found and will expound something with a risk return ratio that is as alluring and beats the bank.  I have not yet seen such an investment here in Mindanao in  real estate, farming, legal and ethically run businesses...

Rice farming returns almost 5% net per annum when all of the stars and moons  planets  and politics and 3 harvest per year all come together, without the liquidity of a bank deposit and with the attendant farming headaches.

Farms are well best considered a hobby that may generate some profit. 

Real estate is exorbitant relative to rental values.

Some foreigners invest by lending money to Filipinos - this is usually done through their Filipino wives/gfs.

The interest rate can be 2% to 20% or more PER MONTH. Sounds GREAT.

But DON'T. Very few will ever pay back the money. The Filipino thinks a loan is like a gift. - they will never repay the capital and after a short time they stop paying any interest. So even if you think 2% per month is good you will never get the 50 months of interest to repay the capital you lost - and same for 20% (they will not pay for the 5 months you need to get back your capital).

The Philippines is a good place to lose money.

Hi; Kernow2017

Agreed :::

Here in 'Surigao City' , we already see banks going bankrupt on a regular basis. (all under receivership of PDIC).
"Surigaonon Rural Banking"
April 2015.
"Surigao City Evergreen Rural Bank" Apr 2014.
Others Closed banks listed/other provinces  :
The PDIC earlier shut the following: *Rural Bank of Malinao (Aklan) Inc., *Koronadal Rural Bank Inc., *Rural Bank of Panay Inc., *Lapu-Lapu Rural Bank Inc., *Rural Bank of Villaviciosa (Abra) Inc., *Rural Bank of Bayawan (Negros Oriental) Inc., and *Rural Bank of Basay (Negros Oriental) Inc.

This is an ongoing thingy...so best be warned & not put all yr $$eggs in a single basket/bank.

Depositers be aware!!

Regards

At least with registered banks you are covered for 500,000 pesos (about USD10,000) - with ordinary people there is no guarantee, except the guarantee you will never get your money back!

worth a read only applies us passport holders


https://retiringtothephilippines.com/li … ns-abroad/

eggs are safer in the US, EU etc

until negative interest begins that is

After 13 years living in the Phils and having lost 2.5 million pesos to government and individual crooks over time several years ago in 8 little businesses taught me much. Let me add that...

1.  on the most rudimentary level, always watch your belongings or make them safe before doing something separate from them. This is about your wallet, purse, cellphone and other gadgets, important papers, etc. And your house can easily be broken into if you’ve not made things more secure politically, that is, have friends with influence in the barangay or become part of the local gang that hangs around to secure their own neighbourhood. Befriend the locals, but selectively, and I’d discourage buying them, but make real ‘friends’ with them. Even so, trust few if anyone! (I’ve had my rented home burgled 3x, and lost about $2000 in all to them).

2.  do NOT invest, if that is what it’s being called, without a filipino-styled investigation. In other words, do not go on the practices that are common in the west to ascertain if the people you are dealing with are okay.
Anything Asian will be different and potentially much more at risk. Most operate on different standards and applying moral, legal or ethical principals on their business transactions can be all lies. And belonging to an influential family, church or other organization most of the time means nothing.

3.  do not rest your trust on anyone who swears on their mother’s or child’s life, nor on anyone who gives you all the info needed to both substantiate their claims or to chase them down should it all be a hoax. They often are building in a credibility narrative to get however much out of you while the going is good. As for the latter phrase, you will be treated only as a temporary source of funds: any talk about potential business and the future will likely be lost on most of the people.
At the same time one doesn’t want to become too upset: this nation is filled with wounded people who’ve been raised in a poor troubled society, and have been seriously let down by their families, and often the only defense for them is a smile, on the surface shyly bowing to your wants, but often with an ulterior drive to get as much out of you as they can while you are still around.
Let’s also bear in mind that the greatest influence on their culture has been Chinese (who like the rest of SE Asia, own the country and the locals), and if you know their style of operating, perhaps I need say no more.

4.  buy land and set up a business with a fair degree of sceptism: what appears to be easy mostly will not be! The friendly faces are no form of insurance that things cannot quickly go all wrong.

5.  believe the stories of other foreigners when they tell you at length of how badly it go for them, and walk carefully in your own journey here at all times.
Aside from my own treatment from business ‘partners, and government agencies like BoC, NBI, BI, LTO, etc., I know that an old guy who had his lives threatened by their ‘friends’ and the barangay police if they ever decided to stop funding their ‘friends.’

6.  on another level, only give to beggars who do look really down and out. The attitude that = ‘you owe me, rich man’ does apply here, and so only the little kids who have no slippers and are wearing a raggy adult t-shirt or the old person outside the doors of a hospital or sitting dejectedly on an equally dirty sidewalk are to be trusted re. genuine need.

7.  land and other property often is not titled properly and must be steered away from completely. It’s quite likely that the family will be at war over their land (if they have any), and therefore the title or deed of the property has not been settled properly in the Land Registry.
As well, if you help one member of a family, it’s likely that others will approach you and want the same treatment. If you do not, they may conspire to harm or kill you. Don’t laugh. This is for real. I know of at least one case where an old guy and his wife had to relocate to keep the family out of their lives, and due to circumstances they managed to chase them down.

Gotta go, but I hope this acts as a deterrent. As the average pinoy will say, “not all are that bad,” which is true, but rare are those who are truly upright and won’t do a number of formulaic things to squeeze. Helps to have a good heart yourself, for that may give you discernment in choosing who to hang out with, or even marry.

GL, and I will try to field any questions...
daenr

daenr :

6.  on another level, only give to beggars who do look really down and out. The attitude that = ‘you owe me, rich man’ does apply here, and so only the little kids who have no slippers and are wearing a raggy adult t-shirt or the old person outside the doors of a hospital or sitting dejectedly on an equally dirty sidewalk are to be trusted re. genuine need.

...
As well, if you help one member of a family, it’s likely that others will approach you and want the same treatment. If you do not, they may conspire to harm or kill you. Don’t laugh. This is for real. I know of at least one case where an old guy and his wife had to relocate to keep the family out of their lives, and due to circumstances they managed to chase them down.


daenr

You are correct in much of what you stated and perhaps all of it. I quoted the points that I will address.

I do not help anyone that I do not know. Strangers are wasting their time coming up to me.

I consider my help to be an investment. I need to know what I am investing in.

I do not invest in people with vices. I invest in those who will pay it back by helping the family and those who I know to be good people. For the most part and with very few exceptions I only help family.

HEED daenr's words - he is ABSOLUTELY 100% correct. View EVERY SINGLE Filipino you meet - even if from a Church (which a Filipino wife/gf is almost certain to attend) or a VERY BEST FRIEND  - as UNTRUSTWORTHY.

Here are a few stories from people I know:

1. Upstanding Church member operates a loan business in the government offices where she works - SAYS she will pay 5% per month. She issues receipts, etc. Looks great. But after getting foreigners to invest MILLIONS she put it into a KAPA scheme (or that is what she said), which is like a pyramid scheme, and says she lost it ALL. Promised to repay at MINIMUM 200,000 a month. After 4 months was down to paying less than 60,000 a month. The chances of those people getting their MILLIONS back is about ZERO. She may even have just kept the money and is paying a small amount back out of the capital she stole. One way to become a millionaire in the Philippines! Be a crook Filipino. And I have heard many other cases of loans never being repaid (about 90% were never repaid).

2. Close  (in fact, BEST) Filipino friends of a foreigner's wife dabbled in property sales (realtors). The foreigner's wife wanted to buy a house so she asked one of the FILIPINO friends to take a look at the property just to confirm what she already thought it was worth - and offered to pay for his petrol and time. He told her he did not want anything as he is her friend. He took about one hour to see the property and the price he stated was exactly the same as the potential buyer thought - so his ROLE was only as a second opinion. She gave him what is two days pay for tradesmen in the Philippines. But as soon as he knew who was selling the property he contacted them endlessly saying he should be paid a big fee for selling the house and then phoned the foreigner's wife to tell her the house was rubbish and not to buy it (a few hours earlier he had been very enthusiastic about it). His intention clearly was to get her to withdraw from the purchase and then offer himself to the seller as realtor! But in doing so he tried very hard to destroy the potential buyer's purchase - so this person trying to wreck things for the foreigner and his wife were THEIR BEST FRIENDS! But, they are Filipinos - so greedy, devious, manipulative. Friendship it seems to Filipinos is only based on what they can get.

3. MANY cases of foreigners buying a house ((ONLY Filipinos can buy land so the husband has to put the land in his wife/gfs name) and then losing it when the wife then leaves him (Note: Frequently AFTER he has bought the house!). He may own the house but it is on another person's land, so it is inaccessible! Go to Court and it will take years to get any justice (that is if any foreigner can get justice in the Philippines - they don't call foreigners 'aliens' for nothing!). The Philippines have made laws 100% in favor of their citizens - no foreigner can gain citizenship and getting justice is very difficult (and VERY risky as Filipinos can hire a killer for about $200 and often do so to avoid the legal process).

4. Foreigner's wife falls ill. He takes her to hospital and she dies. He returns alone to their house - her FAMILY occupied it as soon as they heard she had died. He takes them to Court but, after two years of stress, in which time his deceased wife's family still occupies the house, he dies. END OF - the wife's family now own the house.

5. On other issues: Get imprisoned, even if on FALSE charges, and they will not provide medicines or decent food. Foreigners have died in prison waiting for justice. One case of heard of, the foreigner was eventually freed as his case was not proved - but during the time they imprisoned him, his Visa expired. They re-arrested him for overstaying! And btw, you can be imprisoned for being alone with your stepchildren if they are under 18 - any foreigner found alone with a minor who he is NOT RELATED to is thrown in prison, no bail, and faces up to 15 years in prison. A stepchild is NOT classed as a relative. Nor is niece, nephew, etc. Criminal cases in the Philippines take YEARS - so the innocent stay in prison all that time. I know (this time a Filipino) a man in prison for burglary and his case has not yet been heard - he has been there for 16 years!

Of course, some foreigners get through life in the Philippines unscathed but I have not yet met one who has not been cheated in one way or another.

cogon88 :

worth a read only applies us passport holders


https://retiringtothephilippines.com/li … ns-abroad/

Always good to remind d US citizens about FUBAR.

Hahaha mugtech... FUBAR applies to all of us not only to American Citizens.

Cheers

I just recently invested in a Condominium in Cebu for a minimal amount; as long as you have a good and someone who is honest to act as a property manager profit is assured. the Condominium anyway is registered to the buyer;

Very simple, as proven by university sociology research is that there is common theme seen in the vast majority, if not all, impoverished economies, yes that includes the Philippines. That is a business climate of very low to non-existent morals and ethics amplified by a non-existent or  corrupt judiciary.  If you cannot trust the other party in the agreement and you are unable to obtain redress you cannot conduct business on a large scale, that is until you own the government.   The terms are oligarchy or aristocracy.  The Philippines is an oligarchy with significant percentage of political dynasties.

Please note, the gross decline in business ethics ("so sue me" replacing "my word is my bond") and the degradation in the concept of fiduciary responsibility in the US.  When combined with the cost and complexity of obtaining legal redress.... well just read the news.........

Do your homework, the data is easy to find.  Do not deal with small rural banks for anything over Php 500k, they will soon be taken over by a big commercial bank and that is the limit of the insurance.

BIG rural banks are again easy to find and are usually FAR more consumer/savor friendly than commercial banks.

Have 1 commercial for the international services, and then rural for savings or emergency fund. 

The 10K "paperwork" the FBAR is simple and quick and easy, less than .5 hours the 1st time,

Going beyond a bank savings is where the real tax reporting begins and a realm that only masochists and fools with to much money should dare journey.

LemSaDipolog :

Very simple, as proven by university sociology research is that there is common theme seen in the vast majority, if not all, impoverished economies, yes that includes the Philippines. That is a business climate of very low to non-existent morals and ethics amplified by a non-existent or  corrupt judiciary.  If you cannot trust the other party in the agreement and you are unable to obtain redress you cannot conduct business on a large scale, that is until you own the government.   The terms are oligarchy or aristocracy.  The Philippines is an oligarchy with significant percentage of political dynasties.

Please note, the gross decline in business ethics ("so sue me" replacing "my word is my bond") and the degradation in the concept of fiduciary responsibility in the US.  When combined with the cost and complexity of obtaining legal redress.... well just read the news.........

The US is just as corrupt. They just have to use more zeroes to describe it.

LemSaDipolog :

Do your homework, the data is easy to find.  Do not deal with small rural banks for anything over Php 500k, they will soon be taken over by a big commercial bank and that is the limit of the insurance.

BIG rural banks are again easy to find and are usually FAR more consumer/savor friendly than commercial banks.

Have 1 commercial for the international services, and then rural for savings or emergency fund. 

The 10K "paperwork" the FBAR is simple and quick and easy, less than .5 hours the 1st time,

Going beyond a bank savings is where the real tax reporting begins and a realm that only masochists and fools with to much money should dare journey.

Do you know of any rural banks that have dollar accounts and can do international transfers?

There are none in my locale.

thanks in advance

Just remember you have no legal rights here in the Philippines as a non-citizen your not in Kansas anymore

The courts take years to process a case and will usually rule against a foreigner.

Foreign Participation is some business is strictly prohibited other limit you to a 40% ownership role.

Bribes are required yearly to the BIR and most local officials to renew your bussiness licenses and lets not forget the NPA Revolutionary Taxes

Everyone will want to be your friend and best buddy but this is just to get you involved in some business venture that will more then likely benefit them and not you

[at]Kernow2017, after all the examples you gave us which are so frightening  you are still living in the Philipines ? You must be a very courageous guy :-) if your objective is still to go to Cambodia, you will not stay long there, good luck ! You will have exactly the same stories between foreigners and khmers !

Obstacles are no reason to be put off of the course.

why would they be?

Extreme competitiveness is what it is called.

Some call it cut throat.

You do not have to be cut throat to enjoy dodging cutthroats.

As a newbie in PH. (only 8 years) I like all others research and do it 10 fold as others do.
Investing in PH. as a foreigner? The blade cuts both ways for the unwary.
Keep your bucks where you know they are safe and trickle funds in for daily needs.
Make money and prosper in the climate you are comfortable to deal with.

BTW I invested in beach front house and lot with a 25 + 25 year lease and I can afford to lose that money if the fit hits the shan. OMO.

Cheers, Steve.

[at]Cynthiavilla:   Do you, perhaps, have any interest in the sale of Condominiums?

I am aware that foreigners can purchase a condo, because they will not own the land - but most condos are too small and the monthly fees to management agents are steep and unpredictable.

With a country such as the Philippines foreigners should not always assume they will be welcome - perhaps investing there is too big a risk.

[at]geolefrench:

I am not that courageous, but  have learned a lot.

I am moving from the Philippines to Panama - no more Asian countries for me.

Kernow 2017;

Lucky you!

International Living ranked Panama the world's best retirement haven on its 2019 annual list.

Best wishes
Cheers

A financial paradise :-)

kernow2017 :

[at]geolefrench:

I am not that courageous, but  have learned a lot.

I am moving from the Philippines to Panama - no more Asian countries for me.

Just remember the original and best Panama hats are made in Ecuador.

geolefrench :

A financial paradise :-)

Only if you have loads of money disposable and want to keep them from govt´s eyes or a corrupt govt
official ready to launder illicit gains.

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